Without housing the economy will continue to falter and perhaps fail. Housing is the backbone of the American economic powerhouse. Subprime mortgages made Wall Street bankers rich but created the black hole that has cost millions of jobs, a stagnant recovery and the political warfare that continues to polarize our citizens. Without housing there is no American Dream!
Hank Paulson, as Bush’s treasurary secretary, pushed for TARP to purchase nonperforming mortgages from banks. That would have stabilized housing and fostered an economic renewal. Instead Paulson handed over TARP funds to banks who abandoned homeowners. The banks pocketed federal dollars recapitalizing themselves and refusing to negotiate reduction of principal or interest rates with homeowners lured into mortgages bankers knew would end in foreclosure.
Obama’s stimulus package was dedicated to “shovel-ready” projects in the hope to employ workers and pass money through the economy spurring hiring. It worked only barely in an economy confronting millions of foreclosures. The refusal by some in Congress for a larger package limited the positive effects that could have been expected.
The Fed became the resource of last resort. The Fed anted up to save banks, AIG and others. It has driven interest rates to historic lows. Yet the Fed playing political coward has failed to do what is necessary for housing.
The Fed should have made it conditional for hat-in-hand banks to loan money to homebuyers and businesses. Low interest rates help no one if loans are impossible to acquire. More importantly the Fed could stabilize housing simply by refinancing underwater homeowners who have honored their commitments paying their mortgages. If the Fed is not bound to serve Americans, the voters have every reason to seek its demise.